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Biden Takes Aim at Capital Gains

Legislation

Positioning it as a way to reward work and not wealth, President Biden has released an outline of his tax reform plan that includes a capital gains tax increase, as well as increases to high-income earners. 

The tax reform plan was released this morning as part of the American Families Plan to rebuild the middle class, invest in education and boost wages. Biden will speak about the plan tonight before a joint session of Congress. 

According to a fact sheet released by the White House, the tax reform proposal “will end capital income tax breaks and other loopholes for the very top.” 

Noting that the tax rate the wealthy pay on capital gains and dividends is less than the tax rate that many middle-class families pay on their wages, the fact sheet explains that households making over $1 million—or what the administration refers to as the top 0.3% percent of all households—will pay the same 39.6% rate on all their income, equalizing the rate paid on investment returns and wages. 

Moreover, the proposal would eliminate the practice of stepping up the basis for gains in excess of $1 million ($2.5 million per couple when combined with existing real estate exemptions) and making sure the gains are taxed if the property is not donated to charity. 

The tax reform plan also seeks to close the carried interest provision so that hedge fund partners will pay ordinary income rates on their income and reverse many of the tax cuts changes in the Tax Cuts & Jobs Act.